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The End Of The Line

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It is hard to believe that, just a decade ago, American Telephone & Telegraph Co. was the only phone company in town. Back then, Ma Bell owned all the telephones, controlled the long-distance lines, and dictated who could and could not hook up to them. All that has changed, of course, and now one of Ma's few remaining stongholds is under siege: the coin-operated telephone.

Leading the attack is Robert Albertson, a 46-year-old inventor and the president of Tonka Tools Inc., and its subsidiary, Tonk-a-Phone Inc., of Excelsior, Minn. In its first four months alone, the company has sold more than $500,000 of alternative pay phones, called Tonk-a-Phones. More recently, GNT Automatic Inc. of Waltham, Mass., a subsidiary of a Danish telephone maker, has begun marketing the Paymark, a tabletop pay phone that operates on a slightly different principle.

Neither of these devices is much like a standard pay phone. Unlike a Bell phone, they do not require special lines for determining the cost and length of a call; both functions can be set on the phone itself. They also work somewhat differently. To place a call, a person inserts the appropriate coins, dials the number, and waits. When the other party answers, the caller pushes a button that causes the coins to drop, activating a microphone in the receiver; the caller can then speak to the person he or she has called. If there is no answer, the coins are returned.

But, mechanics aside, alternative pay phones do have one distinct advantage over Bell pay phones: The revenues, and profits, go to the phone's owner.

With a Tonk-a-Phone, for example, the buyer pays about $650 for the telephone, the installation, and the business line hookup. Any additional money that comes in is clear profit. By contrast, the local phone company gets to keep most -- if not all -- of the profit from a Bell pay phone. Indeed, the establishment that installs one may well wind up paying for the privilege of having it on the premises.

"I had a Bell phone in here from 1970 on," says Roger Handevidt of Fort Lauderdale, Fla., who installed a Tonk-a-Phone in his boardinghouse last spring and signed on as a distributor. "I was paying about $47 [per month] just for the business line, and I never got a dime out of it. With the Tonka, I still pay for the phone line, but every quarter that goes into it is mine. At the rate it's been going, the phone will probably pay for itself in about a year."

Needless to say, local phone companies are not thrilled about the new competition. In Minnesota, Northwestern Bell Telephone Co. went so far as to pull the plug on business lines connected to Tonk-a-Phones. In other states, phone companies have delayed their introduction. To date, only a handful of alternative pay phones have been installed.

There are, in fact, some important regulatory issues involved. The phone companies argue that pay phones constitute a public service, which could deteriorate under deregulation. Nevertheless, it appears that full deregulation of pay phones is only a matter of time. The Federal Communications Commission presently has no authority to register or approve coin phones for connection to the public system, but the FCC has no objection in principle to the use of non-Bell pay phones, according to Bill Von Alven, manager of the FCC's Telephone Equipment Registration Program. As for the issue of reselling local phone service, that is largely a decision for the states. At least five are now considering the question.

Meanwhile, Albertson is charging ahead. He has developed a long-distance pay phone and is talking to MCI, Combined Network, and Solon Automated Services about providing low-cost, long distance service. He also looks forward to the day when Bell loses its last monopoly -- on the local phone lines themselves. Independent companies "have already taken away 6% of Bell's business," he says. "That trend will only increase in the future." If it does, Albertson may fulfill his fondest wish -- a life without Bell. "Us and Bell don't get along," he says.